Zomato Shares Gain 17% Till Noon Trading: Should You Buy Or Sell?

The leading food delivery platform Zomato Ltd shares on August 2, 2022 surged by 17.58% till afternoon trading at Rs 54.50 apiece. The 52-week high of Zomato is Rs 169 apiece and 52-week low is Rs 40.55 apiece.

Zomato on Monday said its consolidated net loss in the first quarter of the current financial year almost halved to Rs 186 crore due to higher income, according to PTI agency report.

During the quarter under review, the company's total income rose to Rs 1,582 crore against Rs 916.6 crore in the corresponding period of last year. However, its total expenses also shot up to Rs 1,767.7 crore from Rs 1,259.7 crore, the company said in a regulatory filing.

In a letter to shareholders, Deepinder Goyal, Managing Director & Chief Executive Officer, tried to address questions regarding the transaction value for the acquisition of Blinkit, formerly Grofers, and poor corporate governance, added the PTI report.
"Firstly, we objectively evaluated all available acquisition opportunities in the quick commerce space and after zeroing in on Blinkit, we ensured that rigorous and detailed due diligence, deliberations and negotiations were done before agreeing to the terms of the transaction (like any other company would do for a large and important transaction)," Goyal said.

Should You Buy Or Sell Zomato Shares?

Leading brokerage Jefferies in its one week ago report has maintained its 'buy' rating and a price target of INR 100 on the Zomato stock; sees a consistent improvement in profitability in food delivery.

Jefferies also noted that unlike in the past when Zomato planned to invest across multiple businesses it is now focusing on conserving cash. In this, perhaps, Blinkit was the only exception and has hit the company heavily.

According to the brokerage, "We expect tight liquidity conditions to also push Swiggy to focus on profitability as it also builds businesses beyond the core (particularly its quick commerce offering under Swiggy Instamart), " said the analysts. "With worst of the competition behind, industry profit pool should rise as the sector is already consolidated unlike some of the other spaces in India."

Earlier, on July 25, Brokerage firm Citi has maintained a 'Buy' rating on Zomato post Blinkit deal with the target price of Rs 118.

Brokerage firm HSBC Securities India on July 25 said the potential merger of Blinkit with Zomato will provide the online grocer access to the food delivery aggregator's customers while enabling Zomato to enter the online grocery market, which has a larger total addressable market.